Look for the Union Label…On Your Burger: The NLRB Expands Joint-Employer Rule

MCD strikersBy Jeff Schervone

At the end of August, 2015 in a victory for labor unions, the National Labor Relations Board (NLRB) expanded its joint-employer rule. In BFI Newby Island Recyclery, 240 “sorters, screen cleaners and housekeepers” were outsourced by Browning-Ferris Industries (BFI) from Leadpoint Business Services (Leadpoint) under a private contract. Leadpoint paid the employees’ compensation, benefits and workers compensation insurance in exchange for a per employee fee. BFI supervised the employees on-site and Leadpoint maintained management personnel on-site. The Teamsters Local 350, already on-site representing other BFI employees, organized an election to seek collective bargaining rights for the 260 Leadpoint employees. Traditionally, leased or outsourced employees were considered solely ’employed’ by the staffing company, who provided the employees, and paid compensation, benefits and workers compensation insurance. Since they were not directly ’employed’ by the facility, their votes on whether or not to unionize did not count, until now.

The NLRB determined that both the facility, BFI and the staffing company, Leadpoint are joint-employers for purposes of collective bargaining rights under the National Labor Relations Act (NLRA) to Leadpoint’s employees. The highlight of the NLRB’s Decision is its ruling that “two or more statutory employers are joint employers of the same statutory employees if they ‘share or codetermine those matters governing the essential terms and conditions of employment.'” The mere existence of those rights, not the exercise of those right is sufficient to apply the NLRA joint-employer rule. The basis for the ruling is “to best serve the Federal policy of ‘encouraging the practice and procedure of collective bargaining…'” and to broaden application of the NLRA in the ‘current economic landscape.'” Under this new standard, the votes of the 260 Leadpoint employees must now be counted.

Whether the joint-employer ruling will ultimately undermine the contract between BFI and Leadpoint is an open question. The employees may reject the union. Transaction costs between BFI and Leadpoint may or may not be manageable under their private contract relationship. For now, Leadpoint will be required to abide by the NLRAs labor practice requirements, including the dos and don’ts of elections, and to effectively sit at the collective-bargaining table with the Teamsters if the employees voted for union representation.

The staffing industry with similar relationships, should be on alert for revived union organization efforts in light of the ruling.

But the biggest immediate impact is with the franchise industry. Since 2012, the Services Employee International Union and others have tried to organize fast-food workers at McDonald’s and have lodged over 310 unfair labor practice complaints nationwide. But since those employees were employed by local McDonald’s franchise owners, the NLRA did not apply to them. Now, in light of the new ‘standard’ in BFI, the NLRB could decide that McDonald’s is a joint-employer with all of its franchise owners for purposes of union organization under the NLRA. Notice this is an inversion of the theory in BFI. There, Leadpoint was the primary employer regarding compensation and terms, but BFI and Leadpoint shared supervision. In McDonald’s, the franchise owners pay all compensation, exclusively govern terms and conditions of employment and assume all employment liabilities. But that doesn’t matter to the NLRB. In BFI, the mere existence of some level of control over terms or conditions means collective bargaining under the NLRA applies.

The NLRA was passed in “1935 to protect the rights of employees and employers, to encourage collective bargaining, and to curtail certain private sector labor and management practices, which can harm the general welfare of workers, businesses and the U.S. economy.” In 1935, there were no child labor laws, no Occupation Safety and Health Administration (OSHA) (adopted in 1970), no employee Title VII protections (discrimination, civil rights, adopted 1969), no federal Fair Labor Standards Act (FLSA)(wage and hour laws, minimum wages, overtime wages 1938), no Americans with Disabilities Act (adopted 1990) and no raft of state laws that meet or exceed these standards from the employee protection perspective. We have all those things today in 2015. While the NLRA and unions have a long history (any story involving a 20-foot inflatable rate is a good one), it does not mean that collective bargaining under the NRLA is appropriate in every employee-employer relationship, such as fast-food employees that are not employed by franchisors, like McDonald‘s. In 2015, such employees have many protections under federal and state law to promote the “general welfare of workers.”

Franchise operations that employ hundreds of thousands of low wage, often minimum wage employees could be in for a shock. Given the political heft of labor unions, the public drive for a federal $15 per hour minimum wage, the NLRB could usher in a back-door minimum wage increase. At a minimum, that would drive up the costs, and could even result in the fall of many in fast-food franchise business. All for the purported goal of promoting ‘public policy’ to advance the cause of unions under the NLRA. Given all the economic uncertainties of late, makes one wonder whether our ‘public policy’ is off course.

In the meantime, if you are hungry for a burger, be prepared to pay lot more for it, ask for fries with that, and don’t forget to look for the union label.

JHS September 2, 2015

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